Plan Or Action

May 19, 2006, 03.43pm IST

Not long ago, we spoke with Rajan, who a few years earlier had jumped at the chance to lead a promising high-growth new business within his company. Rajan was alive with ambition. For two decades, he had worked his way up the ladder, from manual labor to management. He believed this new assignment was his ticket to the top. The CEO chose Rajan for the job because he admired Rajan's leadership style. He was a motivator. He was an energizer. He had the ability to rally people around a vision, even if it was years away.What Rajan was not was a planner. He spent as little time planning as he could get away with. Rajan had given the need for planning careful thought — and rejected it.The first observation Rajan shared about time spent planning was that it was time not spent doing. Like many people leading new initiatives, Rajan believed he was in an all-out race. Without a relentless focus on execution, he would not be first to market. When forced into planning meetings, he deflected attention away from immediate results. He talked constantly about the long-term transformational potential of his business. He did not want to be bogged down in details. He wanted to work flat out and focus on the vision.True, there is a tradeoff between planning and doing. And planning in many companies is an exacting process requiring hours of analysis. Rajan's staff was thin, and his wariness was understandable.But Rajan did not need plans similar to those of his peers who ran established businesses. Their plans guided efficient execution and quick isolation of problems. (Example : The cause of a revenue shortfall was that an unexpectedly high number of salespeople in the southeast subregion left the company.) What Rajan needed was simpler. He needed to identify a handful of critical unknowns that could make or break his business and specify measures to resolve them quickly.But Rajan did not see it this way. He thought planning was pointless. Planning was about predicting outcomes, and in a nascent industry, outcomes were inherently unpredictable . So why bother?To learn.Most people that we talk with agree that the first imperative for any new and unproven business is to learn quickly. No competitor knows what the future holds when an industry is just emerging. The winner is not the one that starts with the best strategy, but the one that learns and adapts the quickest.So far so good. But what must leaders learn? People leading new businesses must learn to make better predictions . They must build their understanding of which actions will lead to positive outcomes and which will not. You don't get better at predicting by avoiding it. At first, predictions are wild guesses. Later, informed estimates. Eventually, reliable forecasts. This progression is a natural part of the process of proving a new business . Once predictions are reliable , standards can be set. Notions of what constitutes acceptable performance become crucial norms within any growing company.Getting better at predicting can be an intuitive process if, and only if, feedback is immediate . We are spoiled as children. We get used to immediate feedback . We swing a bat and know immediately if we hit the ball. We play a video game and immediately know our score. We take a test in school and get a grade the next day.In business, we do not have the luxury of immediate feedback . As a result, the process of getting better at predicting — learning from experience — needs structure. It needs discipline. Planning provides that structure and discipline. Predictions are made, recorded , retained, and eventually compared with outcomes. Analysis of that comparison is the heart of learning.Rajan's avoidance of planning had an unfortunate result. It cost him his business. Flush with resources in the dot-com mania, Rajan had invested in several business models simultaneously . In the subsequent bust the company could not sustain such lavish funding. Because he had not identified critical unknowns and gathered evidence against each, Rajan did not know which parts of his business were succeeding and which were failing. The business could only be viewed as a whole. And as a whole, it failed.Vijay Govindarajan and Chris TrimbleThe authors are on the faculty of